Suzlon's Promoters Sell 2.11% Stake

The troubled wind power turbine maker Suzlon Energy sold 2.11% stake in the company on Dec 26, 2012 for a total consideration of Rs The troubled wind power turbine maker Suzlon Energy sold 2.11% stake in the company on Dec 26, 2012 for a total consideration of Rs 63 crore. This was part of the corporate debt restructuring (CDR) efforts that the debt-burdened company had been referred to in Nov 2012 after it defaulted on its Foreign Currency Convertible Bonds (FCCBs). As a part of CDR, its lenders have asked the company to bring in promoter's contribution of Rs 250 crore.

The stake sale, however, underlines that even the promoters do not have enough funds, due to which they have had to sell stake in the company. With this, the promoters’ stake has gone down to 50.65% from the earlier 52.76%, most of which is pledged.

Suzlon's promoters may be required to increase the contribution further from Rs 250 crore, as the lenders are tightening the CDR conditions. As per a report in the Financial Express dated Dec 26, 2012, the bankers have asked the promoters of companies entered in CDR to bring in 25% contribution instead of the earlier 15%. As it has already signed up for CDR, the company may also be required to increase the promoters ' contribution.

How Suzlon's promoters would raise this money is a question at this time. The company has said that it will sell some of its assets and raise more capital. It had started selling its Chinese business operations, which is taking longer than expected. It was also expecting to recover over Rs 1000 crore of receivables from one of its US customers. This customer, however, has recently filed for bankruptcy, due to which possibility of recovery of its receivables seems to be waning. Both of these recent developments go against the company, due to which the promoters may take more time to raise funds.

These developments are also reflected in its stock price, which had risen sharply after the news that it has been admitted by lenders in the CDR cell. The scrip has been on a gradual decline, as optimism in the stock has faded after the bankruptcy of its US customer.

Our calls to Suzlon's spokesperson went unanswered. The external spokesperson only said that the company is positive on the recovery of receivables, and that it is taking a step-by-step approach.